India's first tokenised bond settles on the digital rupee

What is Sebi actually launching next week?

Demat 2.0 is a new securities wallet. India's two depositories built it jointly. It records a bond's ownership on distributed ledger technology, replacing the conventional depository ledger investors already use. Sebi plans to launch it alongside the country's first tokenised bond issuance. The timing lines up with the Global Fintech Fest, according to a person familiar with the plans who spoke to Business Standard.

REC is expected to be the issuer. It is a state-owned power sector lender, one of the regular names in India's public sector bond market, with an AAA credit rating. The choice is deliberate. A pilot testing new settlement rails needs an issuer nobody has to think twice about. Any friction the test surfaces then belongs to the plumbing, rather than the borrower.

The issuance process itself stays the same. Business Standard reports that the normal electronic book mechanism will still handle the private placement and allotment. The change comes after allotment. Instead of sitting in a conventional demat account, the bond moves into Demat 2.0, recorded on a ledger the two depositories jointly maintain.

How the settlement actually works

Two pieces move when a bond changes hands: the security, and the money paying for it. Demat 2.0 settles both on connected digital rails.

Two wallets, one investor

An investor in the pilot needs two wallets. One is the Demat 2.0 securities wallet, holding the bond. The other is a wholesale CBDC wallet, holding the digital rupees that pay for it, linked to their bank account. Business Standard reports that investors need no second demat account and no separate know-your-customer process for it. The securities wallet sits on top of the identity the depository system already has.

One rail instead of two

A bond's ownership normally settles through a depository. Its payment settles separately, through the banking system. The two sides reconcile with each other rather than share one ledger. Venkatakrishnan Srinivasan of Rockfort Fincap told Business Standard what the immediate benefit is. His words: "faster and more efficient settlement, lower operational friction, and better transparency across the bond lifecycle". Prabhkaran Singh Lalli of Advonet made a similar point: reconciliation delays, in his view, are where most of the friction in bond markets sits. Putting the security and the payment on rails that talk to each other, in central bank money, removes that delay.

Automation on the servicing side

The pilot keeps its current market infrastructure. Business Standard reports no separate tokenised exchange is being built. Coupon and redemption payments can run through smart contracts instead of manual processing. That is a servicing upgrade. No venue exists yet where this bond changes hands freely.

Who can buy it

Nobody outside the pilot, for now. Nishchay Nath, founder of BondScanner, described the pilot to Business Standard as controlled, for a select group of investors, with a lock-in and no open secondary market yet. Lalli offered a marker for when that could change: "the part I'd watch is December, tokenisation only means something once there's a functioning secondary market."

Compare that with the tokenized stock or gold token already sitting in an Indian app today. Anyone who finishes the app's own KYC can buy one, any day the market is open, with no lock-in and no restricted investor pool. The REC bond differs on every axis: a named issuer, a named pilot group, a stated lock-in, and a regulator standing behind the plumbing. Neither structure is wrong for what it is. They are simply two different products, built two different ways.

What Parliament's own committee says is still missing

The Standing Committee on Finance, chaired by Bhartruhari Mahtab, tabled its 36th Report on the Securities Markets Code, 2025 in Parliament on 23 July 2026. The Code would fold three existing laws into one statute: the Securities Contracts (Regulation) Act, 1956, the Sebi Act, 1992, and the Depositories Act, 1996. Lok Sabha received the Code on 18 December 2025, per PRS Legislative Research's own tracker.

Inside that report, the committee put three open questions to the Finance Ministry. Does a crypto investment product fall under the new Code at all? Does an exchange offering tokenized securities fall within its scope? Do regulators need additional enabling provisions to oversee tokenised financial products, real world assets included? The Ministry has not answered any of the three yet.

The government's own submission to the committee, quoted in its report, states the position plainly. Virtual digital assets, the submission says, sit outside India's regulatory perimeter today. Its own words: "presently unregulated in India, except for the limited purposes of taxation, prevention of money laundering and reporting". The RBI argued for a wall between the regulated banking system and private crypto or privately issued stablecoins, in its own testimony to the same committee. The central bank drew one exception: it wants room for tokenized government securities to keep developing on regulated infrastructure, apart from the private tokens it wants ring-fenced.

That is the category the REC bond sits in: government-linked, Sebi-supervised, RBI-settled, built inside the exception the RBI itself asked for. It says nothing about whether the enabling provisions the committee still wants exist yet. Those provisions would cover a tokenized share of a foreign company, or a tokenized gram of gold, sold on a retail app. They do not exist.

What this changes, and does not change, for a tokenized stock or gold token you already hold

Nothing about the tax treatment changes, because nothing has been notified to change it. The Income Tax Act taxes a virtual digital asset under Section 115BBH at a flat 30 percent on any gain. There is no deduction beyond the cost of acquisition, no set-off against other income, and no indexation for inflation. Buy for ₹1,00,000, sell for ₹1,50,000, and the gain is ₹50,000. Tax on it is ₹15,000, with nothing else to deduct. Section 194S adds a 1 percent TDS on the transfer itself, above the prescribed threshold. Filing that gain uses its own return schedule.

Section 2(47A) defines a virtual digital asset to include "any other digital asset notified by the government." Lawmakers wrote that definition for cryptocurrencies and NFTs. Nobody wrote it with a tokenized foreign share or a tokenized bond in mind.

Apps selling those products today apply the VDA rate to them as the safe, conservative reading. No CBDT circular has tested that reading by naming tokenized securities specifically. That is a different question from how the REC bond itself gets taxed. The REC bond is a Sebi-supervised debt instrument, held through a regulated depository. A tokenized stock or a gold token is a private token, sold directly through a crypto app. This piece does not settle the open tax question, because nobody has settled it yet.

A tokenized stock and the LRS route to the same underlying share carry different ownership rights entirely, a gap this pilot does not touch either.

Sebi and RBI have shown they can build careful, working rails for one AAA-rated, government-linked issuer and a known, restricted pool of buyers. That is a real proof of concept, and it stops there. The same rails, the same regulatory attention, and the same tax certainty have not reached those products yet. A token representing a share of a company listed on Nasdaq, or a gram of gold, still sells to anyone who can finish an app's onboarding flow today. Those remain two different categories of product, built on two different sets of rules.

Frequently asked questions

What is Demat 2.0?

Demat 2.0 is a new securities wallet built by India's two depositories. It records bond ownership on distributed ledger technology, replacing the conventional depository ledger. Sebi is expected to launch it alongside the country's first tokenised bond pilot.

Who is issuing India's first tokenised bond?

REC, the state-owned power sector financier, is expected to be the first issuer. It carries an AAA credit rating and is a regular issuer in India's public sector bond market.

Can a retail investor buy the REC tokenised bond?

Not in this pilot. It is restricted to a controlled group of investors, carries a lock-in, and has no open secondary market yet, according to BondScanner founder Nishchay Nath.

Does this pilot change how tokenized stocks or gold tokens are taxed in India?

No. Those products continue to be taxed under Section 115BBH as virtual digital assets: a 30 percent flat rate, no loss set-off, no indexation. No CBDT circular has separately confirmed that reading for tokenized securities.

What does the Standing Committee's 36th Report say about tokenized securities?

Tabled 23 July 2026, the report asks the Finance Ministry to clarify two things. Does a tokenized-security exchange fall under the new Securities Markets Code? Are additional provisions needed to oversee it? The Ministry has not answered either question yet.

Crypto investments are subject to market risk. Not financial advice.